The Federal Reserve left interest rates unchanged on Wednesday as officials weighed persistent inflation, rising oil prices, and signs of weakness in the labor market.
The central bank kept its benchmark federal-funds rate in a range of 3.5 percent to 3.75 percent. The decision was approved by an 11-1 vote, with Fed Gov. Stephen Miran dissenting.
In its policy statement, the Fed said economic uncertainty remains elevated. Officials pointed to inflation that is still above target and said the economic effects of the Iran war remain unclear.
Even with those risks, Fed policymakers did not signal a major shift in their broader outlook. Their updated projections still showed only one quarter-point rate cut ahead, while the median forecast for the fed-funds rate at the end of 2026 stayed at 3.1 percent.
Fed Chair Jerome Powell said the full impact of higher energy prices is still unknown.
“The thing I want to emphasize is nobody knows,” Powell said. “If we have a long period of much higher gas prices, that will weigh on consumption, but we don’t know if that will happen.”
The Fed’s latest forecasts showed a hotter inflation outlook than in December. Officials now expect the personal consumption expenditures index, the Fed’s preferred inflation gauge, to end the year at 2.7 percent, up from a prior estimate of 2.4 percent. Core inflation also moved higher in the new projections.
Recent inflation data has added to those concerns. The producer price index rose 0.7 percent in February and was up 3.4 percent from a year earlier, suggesting price pressures were already firm before the recent jump in oil prices.
At the same time, the labor market has shown signs of cooling. The unemployment rate rose to 4.4 percent in February, and the economy lost 92,000 jobs, a weaker result than economists expected.
Growth has also slowed. The Bureau of Economic Analysis recently revised fourth-quarter economic growth down to a 0.7 percent annual rate, from an earlier estimate of 1.4 percent.
Still, the Fed’s official statement struck a calmer tone, saying economic activity has continued to expand at a solid pace, while inflation remains somewhat elevated.
Markets reacted negatively to the decision and Powell’s cautious remarks. Stocks fell Wednesday, with investors focused on the risk that higher oil prices could keep inflation elevated and delay future rate cuts.